Cft welcomes discontinuing Cost of Living Adjustment

POSTED: 06/14/12 1:06 PM

Bakker: “It is not well targeted to the poor.”

St. Maarten – The Board of financial supervision (Cft) believes the Government of St. Maarten would be well advised to examine discontinuing the way the way it structurally adjusts salaries. At the moment the government pays a cost of living adjustment based on the inflation rate for the preceding calendar year. Both the former administration and the new one believe this system is unsustainable and the Cft agrees.

“I have ventured to state that the government must look at that system. It is very expensive, it is not always fair because the impact is skewed and it is not well targeted to the poor, who are most hit by price changes. I believe that the government would be well advised to see if it (Cola) should be discontinued and find a better targeted and more sustainable tool,” Cft Chairman Age Bakker said.

The Cft also believes that if the government continues with making Cola payments that it should be placing the actual payment and its effect on the back service for pensions into the budget. The former Finance Minister Hiro Shigemoto had said the government would make the payment, but it was revealed later that the payment was not a line item in the budget. The current finance minister wants to use administrative procedures to make the payment, while the government prepares and submits an amendment to the 2012 budget that covers, amongst other things, making the 17 million guilder payment to civil servants and teachers.

“This is not good budgeting,” Bakker said of the procedure.

“If the government wishes to continue with these payments in the future, they will need to budget for it.”

The government stands committed to pay cost of living adjustment in 2012 and wants to start a discussion with unions representing civil servants soon after to determine how to move forward on structurally adjusting salaries.

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